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The biliary tree drains the bile produced by hepatocytes to the duodenum via a network of intrahepatic and extrahepatic ducts. In the embryo, the intrahepatic ducts are formed near the branches of the portal vein and derive from the liver precursor cells of the hepatic bud, whereas the extrahepatic ducts directly emerge from the primitive gut. Despite this dual origin, intrahepatic and extrahepatic ducts are lined by a common cell type, the cholangiocyte. In this chapter, we describe how bile ducts are formed and cholangiocytes differentiate, and focus on the regulation of these processes by intercellular signaling pathways and by transcriptional and posttranscriptional mechanisms.